Low agricultural sector growth is cause of concern: Dr Mohan

Published: Friday, September 14, 2007, 20:05 [IST]

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Mumbai, Sep 14 (UNI) Despite remarkable growth and well anchored inflation margins, the country's agricultural sector is still lacking the desired growth and remains a major concern, according to Reserve Bank of India Deputy Governor Rakesh Mohan.

While lowered inflation and financial stability has favoured better corporate performance, there is a long way to go before attaining the desired levels of financial inclusion and credit penetration, Dr Mohan said while addressing Ficci conclave here today.

Owing to a slowdown in industrial growth, foreign investments and high realty prices had shown an adverse trend for the economical growth during 1997-2002, but the economy regained its upward threshold after this because of monetary reforms and economical restructuring, Dr Mohan said.

''A restructuring, both in terms of financial and physical parameters, has happened in the past few years. This apart, lowered inflation rates has also contributed to the corporate boom,'' he said.

''However, it still remains a puzzle for me whether it is easy to start a new company in India and obtain credits for operations.

External agencies say launching a company here is not an easy affair.'' While the number of companies in the country rose to 73,2169 in 2005 from 72,402 in 1982, taking the total paid up capital to Rs 6,540 billion in 2005 from Rs 189 billion in 1982, it is doubtful whether the desired growth has been achieved, he said.

On the other hand, India's direct investment abroad also jumped over the last seven years. Total overseas investments rose to 10.12 billion dollars in 2006-07 from just 2 billion dollars in 2001-02, he said.

Dr Mohan also expressed concern over the huge increase that has come about in the payment for technological services and business and management consultancy services. Expenses for technological assistance doubled to 1,000 million dollars from 500 million dollars in 1990-91, he pointed out.

''Inflation has been lowered. A steady decline in both nominal and real interest rates are also visible. The country has also achieved a high degree of stability in money markets which is crucial for retaining price stability,'' Dr Mohan said.

He emphasised that low inflation rate, which is currently below 4.5 per cent and a high growth in non-food credits, are good indications for the economy.